Welcome to MSEC’s weekly ACA FAQ on reporting. For detailed information on form completion, contact your broker, tax advisor, payroll company, or insurance carrier. If you have a general ACA reporting question, email it to firstname.lastname@example.org. The most commonly asked questions will be answered in this forum. In addition, the Health Care Reform Learning Zone, found on the MSEC website (msec.org), is a rich source of information about the Affordable Care Act (ACA).
Disclaimer: MSEC does not advise on tax matters. The information contained herein is general, and you should always consult qualified tax counsel with any questions.
Q: How should the 1095-C form be completed for COBRA participants?
Applicable Large Employers (ALEs) and self-insured non-ALEs must report on COBRA coverage. ALE’s may report using form 1095-C. Self-insured non-ALE’s use 1095-B. See IRS form instructions for 1095-C/1094-C here and for 1095-B/1094-B here.
The information below describes how to complete form 1095-C for COBRA beneficiaries. How the 1095-C is completed depends on two things: the COBRA-qualifying event and whether the participant was an employee at any time during 2015 as explained below.
Termination of employment
- Line 14: A COBRA offer is treated as “no offer,” even if COBRA is accepted. The IRS instructions specify to use Code 1H (no offer) for any month for which the offer of COBRA continuation coverage applies.
- Line 15: Leave blank
- Line 16: If coverage ends on the employee’s termination day rather than the end of the month of termination, sources vary on which code to use. One suggests Code 2A (Employee not employed during month), while others suggest 2B (Employee not a full-time employee). For subsequent months, sources agree and recommend code 2A (Employee not employed), even if the employee elects COBRA coverage for those months. IRS instructions say not to use Code 2C for any month in which a terminated employee is enrolled in COBRA coverage.
Self-insured ALEs must fill out Part III for any months in which the terminated employee and family members had coverage, whether it was as an active employee or by accepting COBRA.
Reduction in hours
This example assumes the employee is no longer eligible for group coverage and so loses it as a result of the reduction in hours.
- Line 14: 1H (No offer)
- Line 15: List lowest cost MV COBRA premium for self only
- Line 16: Sources vary on which code to use. One suggests 2C (Employee enrolled) if they accept. Another suggests 2B (Employee not a full-time employee) for all months after the hours reduction.
Self-insured employers must report the employee and any covered family members in Part III of form 1095-C.
Self-insured employer reporting for a Qualified Beneficiary who elects COBRA and former employee does not (i.e., divorce, child reaches age 26, etc.).
If a qualified beneficiary independently elects COBRA mid-year (for example, due to a divorce), a self-insured employer must report on this coverage. Either form 1095-B or 1095-C may be used. If using 1095-C, send a separate 1095-C to that individual, with the individual’s name listed in the “employee” Part I section. Complete Part II as follows:
- Line 14: 1G (Offer of coverage to non-employee)
- Line 15: Blank
- Line 16: 2C (Enrolled in coverage)
Self-insured employers must report the individual and any covered family members in Part III of form 1095-C.
Self-insured employer reporting 12 months of COBRA participation
Self-insured employers must report COBRA coverage provided to former employees during 2015, even if the former employee was not employed during any month of 2015. In this situation, the self-insured employer is considered the “insurer” for this coverage, and must report the MEC information. Either form 1095-B or 1095-C may be used. If using 1095-C, complete as follows:
- Line 14: 1G (Offer of coverage to non-employee ) for all months
- Line 15: Blank
- Line 16: 2C (Enrolled in coverage) for all months
Report in Part III information on all persons covered under that individual’s plan, including the months each person had coverage.
Q: How do I report on form 1095-C an offer of coverage to a full-time employee who declined the offer?
If Line 14 indicates that the employer made an offer of minimum value coverage to the employee, an offer of minimum essential coverage to the employee’s dependent children, (using code 1C or 1E) and one of the affordability safe harbors applies (Line 16), then no potential penalty will apply for the employee who declined coverage.
The affordability safe harbor codes are 2F, 2G or 2H and are used on Line 16 of form 1095-C.* These codes designate which affordability safe harbor the employer is using. In each case, the lowest employee cost of self-only minimum value coverage (as reported on Line 15) is compared to:
- W-2 wages for code 2F; or
- Federal poverty line for code 2G; or
- The employee’s rate of pay for code 2H
For an explanation of the Safe Harbor options, see the MSEC Health Care Reform Learning Zone at this link:
*This assumes that the multi-employer arrangement interim guidance does not apply.